A decision reviewing attorney's fees in a complex Title
VII class action may have repercussions for attorney's fees in bankruptcy cases
as well. McClain v. Lufkin Industries, Inc., No. 10-40036 (5th Cir.
8/8/11). You can find the opinion here [an enhanced version of this opinion is available to lexis.com
The Lufkin Industries case appears to be a David v. Goliath case where David
decided he needed reinforcements. Timothy Garrigan, an attorney with a three
attorney firm in Nacogdoches, Texas filed a class action suit against Lufkin
Industries, Inc. under Title VII, alleging disparate treatment and disparate
impact theories. While Mr. Garrigan was found to be well-qualified to handle
the class-action, he determined that "it was imperative to associate with
co-counsel in order to successfully try this case." The Court wryly noted
that, "The case's ultimate trajectory, which spanned a decade and involved
thousands of attorney hours, confirmed his initial impression."
When Mr. Garrigan went searching for co-counsel, he had to cast a wide net.
After being turned down by multiple Texas firms, he ultimately associated
Goldstein, Demchak, a firm from Oakland, California. The plaintiffs' team was
successful. Although their initial judgment was reversed and paired down, the
plaintiff class still recovered $3.3 million in back pay for discriminatorily
lost promotions dating back to 1994.
The plaintiff's attorneys sought $7.7 million in fees. The Court allowed $4.7
million in fees. In doing so, they calculated the lodestar for both the Texas and
the California lawyers at $400.00 per hour. This displeased the California
lawyers who had sought an award based on $650.00 per hour. Specifically, the
District Court ruled that fees should be awarded based on the prevailing market
rate in the relevant legal market.
On appeal, the Fifth Circuit considered how to calculate the lodestar, that is,
the proper hourly rate to be multiplied by the proper number of hours. The
The precedents and purposes governing fee-shifting awards
in civil rights cases are well established. The awards facilitate plaintiffs'
access to the courts to vindicate their rights by providing compensation
sufficient to attract competent counsel. Fee awards must, however, be
reasonable. (citation omitted). The linchpin of the reasonable fee is the
lodestar calculation, a product of the hours reasonably expended by the law
firms and the reasonable hourly rate for their services. (citation omitted).
Charges for excessive, duplicative, or inadequately documented work must be
excluded. (citation omitted).
Seminal to this case is the principle that "reasonable" hourly rates "are to be
calculated according to the prevailing market rates in the relevant community."
(citation omitted). Further, Blum noted, "the burden is on the applicant to
produce satisfactory evidence . . . that the requested rates are in line with
those prevailing in the community for similar services by lawyers of reasonably
comparable skill, experience and reputation." (citation omitted). In an
unbroken and consistent line of precedent, this court has interpreted rates
"prevailing in the community" to mean what it says. Thus, as early as 1974,
this court required district courts to consider the customary fee for similar
work "in the community." (citations omitted). Most telling, perhaps, is this
court's decision in a landmark affirmative action case reducing the fee of
plaintiffs' counsel, a former U.S. Assistant Attorney General and subsequent
U.S. Solicitor General, from the rates he charged in Washington, D.C., to the
prevailing rate in the forum, Austin, Texas. (citation omitted).
Opinion, pp. 8-9.
In the particular case, the Court found that
(W)here, as here, abundant and uncontradicted evidence
proved the necessity of Garrigan's turning to out-of-district counsel, the
co-counsel's '"home'' rates should be considered as a starting point for
calculating the lodestar amount.
Opinion, p. 11.
What It Means
This conclusion is significant for the opposite of what it says. Out of
district rates were allowed as the starting point for the lodestar because
there was extensive evidence that no Texas lawyer was willing to touch the
case. The converse is that an out-of-district lawyer cannot charge
out-of-district rates if there was a qualified, local lawyer who could have
taken the case.
The application to bankruptcy cases (which follow the same lodestar approach)
is that a New York lawyer cannot charge New York rates in Houston without
showing that a similarly qualified Houston lawyer was not available, or that a
Houston lawyer could not charge Houston rates in Austin without showing that a
similarly qualified Austin lawyer was not available, or that an Austin lawyer
could not charge Austin rates in Waco without showing that a similarly qualified
Waco lawyer was not available.
If this decision is applied to bankruptcy cases, it could prove to be a boon to
local lawyers who are perfectly qualified to handle difficult cases but are
willing to charge local rates. After all, if Ted Olson was limited to Austin
rates in Hopwood v. State of Texas, why would a bankruptcy court in
Austin allow a Washington, D.C. firm to charge D.C. rates in a bankruptcy case
in Austin, Texas?
Almost as interesting as the majority opinion are the concurrences. Chief Judge
Jones and Circuit Judge Dennis each wrote separately to discuss aspects of the
case. Since Chief Judge Jones authored the majority opinion, her concurrence to
her own opinion is interesting to say the least.
Chief Judge Jones wrote to express her concern that the California lawyers
were, let's be frank here, being greedy. She stated:
It cannot escape the reader's attention that the
Goldstein Demchak firm has been authorized to receive several million dollars
in fees, and a million dollars in expenses, for prevailing in this protracted
case. But to them, that's not enough, and they seek an hourly increase that
will add $3 million more to their award. If that happens, the attorneys will
have received nearly double the dollar award of the plaintiffs. What has fee
shifting come to? This is not an appeal about incentivizing modestly
compensated attorneys for pursuing noble goals: the $400 hourly rate awarded to
Mr. Garrigan is hardly a day laborer's fee. This appeal is designed simply to
enrich, not to enhance or encourage. The Supreme Court holds that fee-shifting
cannot bring a windfall to attorneys. (citation omitted). On remand, the
district court should exercise its discretion within the parameters we have set
out to prevent a windfall recovery.
Opinion, at pp. 20-21. Do you think that Judge Jones made
her feelings about the fees in this case clear enough? While Chief Judge Jones'
majority opinion allowed the possibility of higher rates for out of district
counsel, her concurrence suggests that she strongly objects to allowing that
possibility in practice. Query whether she would show the same scorn for a
bank's lawyers who sought to obtain a "windfall recovery"?
Judge Dennis wrote separately to suggest that the "hourly rates charged by
the defendant's attorney's provide a helpful guide in determining whether
similarly high rates and hours requested by the plaintiffs were
reasonable." In the bankruptcy context, if the creditor's lawyers are
charging obscene fees, then the debtor's lawyers may charge merely scandalous
I think that this opinion, while affirming national rates in the specific case,
is a victory for local rates in general. Of course, it bears mentioning that
determining the appropriate market rates to use in the lodestar is only the
starting point. Courts are still free to adjust upward or downward based upon
the facts of the specific case.
more at A Texas Bankruptcy Lawyer's Blog
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